What are the primary goals of rate regulation?

The primary goals of rate regulation focus on maintaining a fair and balanced approach to insurance pricing, which encompasses several key principles. The aim is to ensure that rates are not excessive, meaning they shouldn't be higher than necessary to cover the insurer's expected costs and profits. If rates were excessive, it would lead to consumers paying more than what is reasonably expected for their coverage.

Additionally, rates must not be inadequate, which means that they should provide sufficient funds to meet future claims and operational costs without leading to insurer insolvency. Inadequate rates could undermine the stability of the insurance market and leave policyholders without necessary support in times of need.

Lastly, the rates must not be unfairly discriminatory. This principle emphasizes that insurance rates should reflect the risk associated with individual policyholders and not be influenced by factors such as race, gender, or other irrelevant criteria. Unfair discrimination in pricing can lead to inequities and loss of trust in the insurance system.

In summary, effective rate regulation aims to create a balanced system that supports both the insurers' need for financial viability and the consumers' need for fairness and affordability, ensuring that rates are reasonable, justifiable, and equitable across different segments of the population.